Evercore's Guha says Warsh unlikely to signal October Fed hike
Traders already price near 90 per cent odds of a December rate hike before Warsh speaks
Published
Investors are watching for signals from Federal Reserve Chair Kevin Warsh on whether the central bank is moving from a skip to an October rate hike. Krishna Guha of Evercore says Warsh will, on balance, speak in a way that does not point to an October move, mindful of conditions abroad.
That view runs against a hawkish tilt among Fed officials since September's inflation report came in hot. Cleveland Fed's Hammack, Chicago's Goolsbee and Boston's Collins have each pressed for continued tightening. Goolsbee has called the CPI report discouraging and pointed to services inflation as a concern, and has separately warned that tariffs and rising oil prices could push the economy toward stagflation.
Traders price near 90 per cent odds of a December hike and have added bets on further increases through 2027. Citigroup has added a December hike to its own forecast, while still expecting cuts in 2027. The Fed's Beige Book found eight of its regional districts describing price growth as moderate, with three flagging quickening input costs. Thursday's producer price data is expected to feed into officials' inflation view ahead of the October meeting.
If Warsh instead echoes the patience shown earlier by New York Fed's Williams and Governor Bowman, before the CPI report reset the debate, it would reopen a split the data appeared to have settled rather than confirm what the market is currently pricing. Treasury yields on longer-dated debt, which only briefly eased off their 5.24 per cent high on those earlier dovish signals, are the asset most exposed to whichever tone Warsh strikes. National Economic Council director Hassett has said the market has confidence in the new Fed chair, even as officials themselves remain divided on rates.